Decentralized Development in Agriculture: An OverviewDecentralized
Development in Agriculture An Overview by K.C. Lai, Consultant,
Agricultural Policy Support Service, Policy Assistance Division,
FAO, Rome, Italy
Vito Cistulli, Agricultural Policy Support Service, Policy
Assistance Division, FAO, Rome, Italy for Food and Agriculture
Organization of the United Nations, FAO
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Table of Contents
5 Benefits and disadvantages of
decentralization.................................7
5.1 Potencial
benefits..........................................................................
7 5.2 Disadvantages and risks
................................................................
8
6 Decisions on decentralization: conceptual and practical
issues............9
6.1 Reasons for government interventions
........................................... 10 6.2 Service
provision roles and responsibilities
..................................... 11 6.3 Organizational and
political factors ................................................
12
7 Principles and conditions for decentralization
................................. 14
7.1 Goals and outcomes of
decentralization.......................................... 14 7.2
Three key principles for
decentralizatoin......................................... 15 7.3
Basic
conditions..........................................................................
17
9 Readers’ notes
..........................................................................
19
9.1 Easypol links
..............................................................................
19
10 References and further
reading....................................................
19
1
1 SUMMARY
This module provides an overview of the theme on “Decentralized
development in agriculture”. It explains what decentralization is
about, including who is involved and the various forms and
dimensions of the process. Readers’ attention is drawn to various
practical expressions of decentralization in agricultural and rural
development, including country efforts at: reform of agricultural
services; natural resource and environmental management; and,
development or refinement of planning and management processes. The
module next examines the potential benefits of decentralization,
possible drawbacks and risks associated. Conceptual and practical
issues that have an important bearing on policy decisions on
decentralization are discussed. This focuses on the changing roles
and relationships, posing important questions on whether there is
need for government interventions, and if so in which aspect of
service provision. We also highlight the importance of
organizational and political factors. Decentralization is by and
large a highly empirical exercise, and ensuring the right mix of
conditions is essential for successful implementation. We next
outline key principles and some basic conditions to serve as a
general guide for decentralization decisions. International
experience and FAO’s contribution to advancement of decentralized
approaches to development are then briefly reviewed. To find
relevant materials in these areas, the reader can follow the links
included in the text to other EASYPol modules or references1. See
also the list of useful EASYPol links included at the end of this
module.
2 OBJECTIVES
The main objective of this module is to provide a basic
understanding of the key issues and factors to be considered in
making decisions on whether and when decentralization, in the
agricultural and rural development context, would be appropriate
and practicable. This is meant to facilitate subsequent, more
in-depth, discussion of how decentralized development, in its
various practical expressions, can best be analyzed and
facilitated.
3 INTRODUCTION
This module is a general introduction on what decentralization is
about, its relevance to agricultural and rural development, and
important conceptual and practical issues to be considered in
policy decisions. It is meant to provide a basic understanding of
the key
1 EASYPol hyperlinks are shown in blue, as follows:
a) training paths are shown in underlined bold font; b) other
EASYPol modules or complementary EASYPol materials are in bold
underlined italics; c) links to the glossary are in bold; and d)
external links are in italics.
EASYPol Module 012 Thematic Overview
2
principles and basic conditions involved, including the empirical
nature of decentralization processes, and the importance of
systematic analysis in decision making. It thus serves as an
essential backdrop to examine wider policy reform agendas, cutting
across such initiatives as rural income generation, poverty
reduction, food security enhancement, and the management and
protection of natural and environmental resources. The module is
designed for use in the training path Decentralization and
agricultural development. It is intended to precede, and be used in
conjunction with, modules covering topics on decentralization of
agricultural services; environment in decision making; and
decentralized planning and management. It has however wider
applicability in a range of other training contexts, including
those on rural development strategies; participatory approaches to
development; sustainable livelihoods; local and regional
development; and environmental analysis and planning.
Target audience
This module is intended for a wide audience, ranging from policy
analysts and decision makers, to development practitioners,
training institutions, and media. It is of particular relevance to
senior and mid level officials and professional officers in
ministries of agriculture, livestock, forestry, rural development,
and cooperatives, including line departments and training
institutes/units, and ngos/cbos. Suitably adapted, it may also be
used as a reader in undergraduate courses in development.
Required background
No specific technical background, beyond reasonable language
skills, is required for this module. It is anticipated that
individuals with a degree in an agricultural or rural development
related area, and those with several years of experience in
agricultural policy analysis or development planning and
implementation, at a mid to senior level position, should have
little difficulty in grasping the module’s content.
4 WHAT IS DECENTRALIZATION?
4.1 Decentralization as a process?
What do we mean by decentralization? A widely accepted definition
is that of a broad- based institutional process involving the
transfer of authority and responsibility for public functions from
the central government to other levels of governance. Under
decentralization, responsibilities such as planning, management,
and resource raising and allocation may be transferred from central
government2 to: field units of central government ministries or
agencies; subordinate units or levels of government;
semi-autonomous public authorities or corporations;
2 Rondinelli, 1981. The last point has been modified from the
original statement to include private enterprise and the entire
voluntary sector.
3
area-wide regional or functional authorities; or organizations of
the private and voluntary sector.
The implications of this definition in terms of organizational
responsibilities are illustrated in Figure 1, below.
Figure 1 - Decentralization of responsibilities from central
government
Central Government Administration (CGA)
Decentralization reforms focus on: the relationships between three
major sectors of
sector, the private sector, and the voluntary sector; within the
public sector, decentralization focuses o
decision making and on resource and responsib levels of
government.
In defining decentralization the concept of the ‘level’ extensively
used. With regard to the public adminis normally recognized3,
namely: The international level, composed of internatio
agreements between states. The national level, that is, the central
governmen
government in federal systems.
Civil Society (CSO)
Private Sector and CSO
governance, namely, the public and n the structure and processes
of
ility allocation among different
of the system of governance is tration, five different levels
are
nal organizations governed by
l arrangements in different countries.
EASYPol Module 012 Thematic Overview
4
The regional level within a country, that is, the states in a
federal system or the regions or provinces of a unitary state and,
depending on the extent of devolution governing their relationships
with the national level under the constitution: the district level
and sub-distric levels.
In addition to the public administration, civil society
organizations (CSOS) also form part of a country’s system of
governance. These comprise sets of persons organized around a
common interest, generally with defined objectives. CSOS can
operate at a very low, community level and join together into apex
organizations. These can operate at sub-district, district,
regional or national level and even at international level. The
community level is normally not included in the public
administration structures, but is very important in rural areas.
The word ‘community’ is used both for a level of the civil society
system of governance and a social organization4. A self-contained
socio-economic residential unit characterizes the community. The
community is a separate level below the district and the municipal
levels, although in some countries very small public administration
bodies with ‘municipal’ characteristics may coincide with a
‘community’. In rural areas, non-government systems of governance
by the civil society, groups and communities, are very important.
Groups of people organized around a common interest are quite
common. For example, groups of farmers, men and women, often get
together to develop a micro-irrigation project, to manage a common
stock of cereals or to procure fertilizers. Similarly, groups of
women get together to undertake an income generating activity, to
hire somebody to look after children when they go for work, or to
organize a rotating savings and credit.
4.3 Forms of decentralization
Decentralization may take various forms. the four main forms are
reported below and shown graphically in Figure 2, below. Political
decentralization is associated with increased power of citizens and
their
representatives in public decision-making. it generally involves a
representative political system based on local electoral
jurisdictions and pluralistic parties.
Administrative decentralization is the transfer of responsibility
for planning, financing, and managing certain public functions from
the central government and its agencies to field units of
government agencies, subordinate units or levels of government,
semi-autonomous public authorities or corporations, or area-wide,
regional, or functional authorities.
Administrative decentralization may be done through functional and
areal distribution of power5. Functional distribution transfers
authority to specialized organizations that
4 Notice that the word ‘community’ can also be used to define
groups of people with common ties of
ethnic or religious nature, who are not necessarily associated with
a specific geographical territory. Sometimes, the word is also used
to define a nation as a whole.
5 D. Rondinelli, 1981.
5
operate across jurisdictions. areal distribution transfers
responsibility for public functions to institutions within
specified geographical and political boundaries, typically a
province, district, or municipality. Three main forms of
administrative decentralization are generally recognised:
Deconcentration - the redistribution of decision-making authority
and financial and
management responsibilities among different levels of the central
government. It consists essentially of assignment of specific
functions and tasks of central administrations to staff posted in
peripheral locations within the national territory. This is often
considered the weakest form of decentralization.
Delegation - central governments transfer responsibility for
decision-making and administration of public functions to
semi-autonomous organizations not wholly controlled by the central
government, but ultimately accountable to it (e.g. sub- national
housing authorities, transportation authorities, regional
development corporations).
Devolution - local governments are assigned clear and legally
recognized geographical boundaries over which they exercise
authority, and within which they perform public functions (e.g.
raising revenues, investment decisions). It is this type of
administrative decentralization that underlies most political
decentralization. Effective devolution means high local autonomy as
well as accountability.
Fiscal decentralization is associated with the authority of the
decentralized units to make expenditure decisions with funds either
raised locally (e.g. user charges, co- financing with users,
property taxes, borrowing, etc.) or transferred from the central
government. In many developing countries local governments or
administrative units possess the legal authority to impose taxes,
but often the tax base is not sufficient to undertake local
investments, with continued reliance on ‘inter- government’
transfers. with budget autonomy and clear expenditure assignments
of local governments, this becomes synonymous with
devolution.
Market decentralization is the most decentralized form in as much
as decision- making power is transferred from public to private
organizations. It can take two different forms:
Privatization which means allowing private enterprises to perform
functions that had previously been monopolized by government, or
contracting out the provision or management of public services or
facilities to commercial enterprises, or still financing public
sector programmes through the capital market and allowing private
organizations to participate; Deregulation which consists of
transferring services provision or production activities previously
owned or regulated by the public sector to competing private
organizations (e.g. electricity or broadcasting provided by various
and competing companies); and Partnerships between public and
private/ voluntary sectors, within market decentralization and
devolution processes, based on cooperative or business arrangements
involving government, non government and civil society
organizations. The above are not mutually exclusive: various forms
of decentralization may be pursued simultaneously, as part of
overall economic and administrative reform. moreover,
decentralization is not an alternative to centralization: both are
needed and an
EASYPol Module 012 Thematic Overview
6
appropriate balance is essential to effective functioning of
government. nevertheless, decentralized development is nowadays
seen as an essential part of good governance and a necessary
condition for private sector growth. It is also considered a
requisite for local participation in social and economic
development, and empowering local people in making decisions about
their lives and the environment in which they live.
Figure 2 - Forms of decentralization
DECENTRALIZATION
NAAA
Administrative
4.4 Practical expressions of decentralized development
Decentralization processes are generally subsumed within a
country’s wider policy reform agenda. In the context of the
agricultural and rural sectors of many countries, these cut across
and operate in parallel with such initiatives (strategies,
programmes and projects) as rural income generation, poverty
reduction, food security enhancement, and management and protection
of natural and environmental resources (land, water, forests and
catchments in particular). They are also cogent to national
policies aimed at geographically balanced development, redressing
regional economic disparities, or pursuance of ‘dispersal’
agricultural development. To greater or lesser degree,
decentralization finds practical expression in institutional
efforts to: improve agricultural services, with a view to achieving
greater cost effectiveness
and sustainability; introduce or enhance existing systems of
management and protection of agricultural
and other natural and environmental resources; strengthen
capacities in, and refine approaches to, development planning
and
management at sub-national levels; enhance or reform of systems of
local governance and fiscal management, including
responsibilities for revenue raising, fiscal transfers, and
development expenditures at various tiers (local, regional,
national) of government.
Decentralized Development in Agriculture An Overview
7
The first three of the above are discussed in other modules of this
training path6. The fourth sub-theme is essentially one of fiscal
decentralization: it shades into the area of public sector
management. This is not covered in the present training path.
However, a wealth of experience and literature resources are
available elsewhere, including those of the World Bank Institute,
under the public finance and intergovernmental fiscal relations
theme, and within UNCDF, which had been supporting local
development planning and funding processes in various developing
countries. World Bank Institute Sites:
http://www.worldbank.org/wbi/publicfinance/
http://www.worldbank.org/wbi/publicfinance/decentralization/about.html
5 BENEFITS AND DISADVANTAGES OF DECENTRALIZATION
5.1 Potencial benefits
There are potential benefits from decentralization, regardless of
type. Reforms to economic and political systems, inclusive of
governance, should help make these more responsive to local
peoples’ preferences and requirements. By bridging the gap between
suppliers and users of goods and services, decentralization
measures may be expected to lead to improved accountability,
transparency and greater economic efficiency. Reasons often
advanced for this include the following7: Where it works
effectively, decentralization can help simplify complex
administrative procedures and alleviate decision making bottlenecks
caused by central government planning and control of economic and
social activities.
6 For links to these modules, see introductory EASYPol Module 011:
Decentralization and Agricultural Development: Introduction to the
Training Path. 7 Adapted from Rondinelli, 2001.
8
Broadening participation in political, economic and social
activities makes for greater ownership and commitment of people to
development activities and processes - in particular ones they have
played a part in formulating.
It facilitates more accurate identification of peoples' needs and
priorities as well as development constraints and opportunities,
including targeting of the poor and disadvantaged, which require
detailed knowledge of local circumstances.
There is greater scope for local initiatives in policy innovations
and for harnessing local peoples’ creativity in designing
development programmes, projects and activities.
The closer proximity of administrators to the communities renders
them more accountable for local expenditures and revenues, and
creates the dynamics for delivering services of that are relevant
and of acceptable quality.
In some countries, decentralization may create a geographical focus
at the local level (such as sub-regions or districts), and help in
more effective coordination of national, sub-national and local
development programmes.
These are important factors for provision of services that are:
responsive, effective, efficient and sustainable. Improved
services, in terms of quantity, quality and reliability which
ensue, would help increase the willingness of people to pay for
them, resulting in better cost recovery, hence lower overall cost
of government (this is summarized as a paradigm8 of
decentralization, in Figure 3, below). All these are considered
vital to achieving such societal goals as economic stability,
sustainable growth and development, better living standards, and
growth of civil society overall.
Figure 3 - The paradigm of decentralization
Th pra can
5.2 Disadvantages an
e degree to which the above ctice, vary from situation to si
exacerbate the very problems
paradigm is a logical model or a fra
dopt in interpreting a phenomenon, d
More transparenc
Better services
More efficiency
d risks
benefits from decentralization tuation. Under certain circum it
seeks to address, as in the fo
mework of assumptions and associ iscussing an issue, or deciding on
a c
Less cost to government
tions of ideas, which people ourse of action.
Decentralized Development in Agriculture An Overview
9
The proliferation of large numbers of decentralized units could
mean increased overall unit costs i.e. loss of economies of scale,
and poorer quality of development effort and services, especially
where the already limited human resources are overstretched.
Wasteful duplication of effort and weakening of coordination and
communication could then result.
Appropriation of functions and resources transferred under
decentralization by the richer, better organized areas or
organizations, and/or domination by local elites in decision making
are a potential hazard, particularly in remote and poorly
integrated areas. Well placed local officials and individuals could
manipulate the system to their own agendas, at the expense of poor
and marginal groups. The larger number of decision-making points
within the administration could also open the way for corruption of
the local bureaucracies.
There are limitations to reliance on market forces. Monopolistic
and monopsonistic practices (single seller or buyer, respectively),
trade cartels, the distortion of prices through taxes and subsidies
(i.e. fiscal policy), and externalities (upstream and downstream
effects) can cause markets to fail (i.e. prices deviating from
their true costs). Market imperfections can seriously undermine
economic efficiency.
Local development priorities can run counter to wider concerns for
sustainable natural resource use and environmental protection.
Local taxes and financial incentives may not reflect the full
economic cost of the use, degradation and depletion of natural
resources. Poorer areas with few economic opportunities may find it
difficult, without central government intervention, and financial
and technical resources, to achieve a proper balance between the
exigencies of local economic growth and sustainable resource
use.
Concerns have also been raised that sharing responsibilities for
policy decisions allow sub-national levels of government to
circumvent central control of monetary and fiscal policies, thereby
aggravating problems of macroeconomic stability. The argument here
is that central governments are better equipped in dealing with
spillover effects of local spending, inflationary pressures of
monetization of local debt, and with cyclical shocks.
There can thus be potential disadvantages from decentralization.
This is especially the case when administrative and technical
capacities are underdeveloped at local levels, and insufficient
checks and balances are in place. Much would however depend on the
specific context of a country and its regions, including its
social, economic, legal and political conditions. Understanding
these conditions and the relationships between the various
stakeholders is thus vital to minimizing the risks associated with
any decentralization process.
6 DECISIONS ON DECENTRALIZATION: CONCEPTUAL AND PRACTICAL
ISSUES
Decentralization involves making changes in roles and
responsibilities, including that for provision of goods and
services by the government structure. Some fundamental questions
which need to be asked are:
EASYPol Module 012 Thematic Overview
10
Is there need for government intervention in the first place? If
so, where? Could certain types of services, or aspects of service
provision be re-assigned? What role(s) and responsibilities should
the government retain? What organizational and political factors
would assist or impede the decentralization
process? A number of issues that have an important bearing on
decentralization policies are discussed below.
6.1 Reasons for government interventions
Three main economic reasons often advanced for government
intervention (Box 1, below) are: correcting for market failure;
provision of merit goods; and equity and income distribution
considerations.
Box 1 - Economic reasons for government interventions in service
provision
Market failure this refers to situations where the unfettered use
of the market system or the private sector to allocate goods or
services would not lead to a economically efficient9 outcome in
which the price of the good adequately reflects the (opportunity)
costs to society of producing it. These may arise due to presence
of monopolies, externalities or spillover effects, incomplete or
missing markets, and the nature of public goods that make it
difficult to charge users directly. Merit goods another possible
justification is provision of goods or services that governments
mandate individuals to consume, where it is judged that people,
left to their own devices, may not act in their own best
interests10. Subsidising of sports facilities and cultural
activities fall under this category. This paternalistic reason for
intervention, when a government intervenes because it claims to
know what is in the best interest of individuals better than they
themselves do, should not be confused with government intervention
to correct externalities. Income redistribution even if an economy
is economically efficient, the allocation of goods it generates may
not be consistent with government’s social welfare objectives. For
example, the government may wish to provide ‘safety nets’ for
people who are temporarily or permanently disadvantaged, to ensure
they have access to minimum levels of certain goods and services.
It may also intervene, through tax and subsidies, to alter the
income distribution pattern in order to narrow income disparities
between and within regions and social groups11.
9 In economics textbooks this would be referred to as a ‘Pareto
efficient’ market where it is impossible to
make one member of society better off without making someone else
worse off. 10 This is the definition used by Stiglitz (1997) Some
authors use a broader definition that embraces
goods and services that are included under ‘redistribution of
income’ goods. 11 Refer to EASYPol Module 013: Decentralization and
Agricultural Development: Decentralization of Agricultural Services
for a fuller discussion of the above.
11
For a given decentralization context, the premises on which these
principles are based would need to be re-examined. Are the needs
for government intervention real or perceived? In particular, what
evidence is there, if any, of market failure for specific goods and
services? What might hold true historically, as at the time of
independence of some post-colonial countries, may no longer be so
today. In many instances where market failure is not a problem,
intervention could distort an otherwise well-functioning market,
giving rise to policy failure. Service provision may in fact be
more effectively undertaken by either lower levels of government or
by private sector and community organizations. Where provision of
merit goods and equity considerations are concerned, the validity
of their justifications may also need to be questioned. This would
require revisiting a government’s social policies and poverty
reduction/welfare support strategies.
6.2 Service provision roles and responsibilities
Governments have in the past reacted to problems of market failure
by undertaking the provision of services themselves. Here it is
useful to make a clear distinction between provision and
production. The provision of any good or service can generally be
disaggregated into four components: financing or funding the good
or service; its physical production and delivery; the regulation of
provision; the consumption of the good or service.
There is no compelling reason why these four components should be
provided by the same sector or organization, level of government,
or by the government itself. Different parties can assume
responsibilities for different components. Moreover, different
forms of decentralization may be used for different functions. For
a given consumer base or target group for whom goods or services
are to be provided, decentralization decisions would then need to
consider: Who should pay? Who should produce? Who should
regulate?
These have enormous policy implications for a range of fiscal,
pricing, cost recovery, efficiency, and institutional issues.
understanding the factors involved is important to determining the
appropriate level or form of governance to deliver particular
functions. In principle, and for a particular type of good or
service12, decentralization decisions would be assisted by
first:
12 For elaboration of detailed aspects of service provision, refer
to the EASYPol Module 013: Decentralization and Agricultural
Development: Decentralization of Agricultural Services.
12
Systematically disaggregating service provision into the various
components. Assessing for a given type of service and service
component, who could do so in the
most effective and efficient way.
6.3 Organizational and political factors
Making changes to organizations and relationships implies
redistributing shares of power within a society. This impacts on
the organizations and ‘agents’ responsible for service provision as
well as actors within the political arena, whose support cannot be
taken for granted. An understanding of organizational and political
factors is thus vital to determining whether decentralization is
likely to be institutionally feasible and political acceptable.
Most important aspects are: a) the organizational culture; b) power
configurations; c) motivations and roles of politicians and
government bureaucrats; and d) the incentive system covering
rewards and penalties. Organizational culture the behaviour of
organizations, and the results of organizations’ activities,
depends to a large extent on the way tasks are performed. However,
policy directives per se do not effectively influence this. It is
an organization’s culture which determines the way that it
implements its tasks, regardless of official procedures. It may be
seen as a persistent patterned way of thinking about the central
tasks of, and the human relationship within, an organization. it
can have a profound effect on service delivery and the way that
management and staff of an organization respond to the needs of the
client group (see Box 2).
Box 2 - examples of two different organizational cultures
The Public Works Department (PWD) is made up of engineers who want
to build roads and bridges. They perceive this as the core task of
the organization. They also have a distinct appreciation of their
professional values, and tend to consider other functions in the
organization as subsidiary and of lower priority. When this is the
case, ‘engineering’ is the dominant culture of the PWD. A section
of the extension department of the ministry of agriculture has
adopted Participatory Rapid Appraisal (PRA) as their professional
approach. Field staff firmly believe that understanding farming
systems and farmers’ survival strategies and assisting them to
respond to their needs to improve livelihood is the core task of
their organization, all other functions being less important. This
establishes a uniform dominant culture that combined features of
professionalism and ideology.
Power coalitions. The way that organizations react to reforms, or
the threat of them, has an important bearing on the effectiveness
of decentralization reforms. Organizational behaviour can be
conceptualized as resulting from the interplay of internal and
external forces related to coalitions of people with influence13.
These can affect the policy formulation process and, to an even
greater extent, the degree to which policy decisions are
implemented in practice.
13 A fuller discussion on these issues may be found in Mintzberg,
1983.
Decentralized Development in Agriculture An Overview
13
The power relationships between different groups within and around
an organization, manifest in internal as well as external
coalitions, are thus considered an important factor affecting the
outcome of decentralization attempts. The combination of such
coalitions can result in a power configuration that may or may not
be conducive to the decentralization process. Bureaucrats and
politicians. Governments are organizations run by people with
political power. By nature, the fundamental survival and
development strategy of people with political power is to maintain
and, if possible, to increase, their power. The supporters of
people with power constitute a constituency, to which people with
power are accountable for their action in the exercise of power14.
Individual politicians need not fully share collective decisions on
reform processes. Even cabinet members can have different
constituencies, representing different interests. There may be
different forces, some of which may be advocates of change, others
of conservatism. the power of (and within) different ministries and
government agencies may change with decentralization. Some
politicians may win and others lose in the process. Those who lose
may try to cut their losses and oppose decentralization in various
disguised ways. Whilst politicians are accountable to their
supporters, operational responsibility for running public
organizations often rests with the bureaucracies. In practice,
bureaucrats have power, often more so than politicians, to
influence the behaviour of public organizations. They also have
power to act in such a way as to maintain and increase the power
derived from their office. Hence, the adage that ‘political will’
is necessary for decentralization to succeed needs to be modified
in many instances to include bureaucratic acquiescence and
blessings at the various levels. Incentives structure. The success
of a given reform also depends on availability of an effective
incentive system that would secure the positive contribution of
‘agents’ within the system. This is needed to help: a) overcome
some of the principal-agent problems that can plague large
organizations and bureaucracies (see Box 3, below); and b) bring
about, in the most efficient manner, the production, allocation and
consumption of goods and services in line with people’s
preferences. One advantage claimed for the effectiveness of private
sector organizations is that the rewards and penalties of the
market system, in the form of profits and the possibility of
bankruptcy for owners, and bonuses and the threat of dismissal for
employees, imposes a requirement for efficiency often missing in
public sector organizations. Other types of rewards and penalties
are however also important for the proper functioning of the
economic and political system of a country. A special role in the
system of incentives (or disincentives) is that of bureaucratic
procedures (more commonly known as ‘red tape’), which may stifle
private initiative and discourage private enterprise. This is a
matter of direct concern to decentralization policy
designers.
14 The concepts of constituency and accountability are closely
linked. Accountability is the process whereby the people who
represent a constituency are made to respond to the constituency
for their action on its behalf.
EASYPol Module 012 Thematic Overview
14
Box 3 - Principal-agent problem and system of incentives
A principal-agent problem refers to how party a can motivate party
b to act for a’s interest rather than b’s own self-interest. Party
a, tends to be the employer, and b the employee. Or a, may be a
member of a rural cooperative and b the cooperative chairman. A
system of incentives is the set of rewards and penalties
(financial, social, political or administrative) which governs the
demand and the production and distribution of goods and services.
Rewards: prices, profit, power, status, promotion, winning the
elections Penalties: costs, bankruptcy, shame, demotion,
marginalization, transfer to posts with no career prospects, losing
the elections.
7 PRINCIPLES AND CONDITIONS FOR DECENTRALIZATION
The above shows that the process of decentralization can be a
complex and highly empirical exercise. Worth reiterating is that
various forms of decentralization can be employed in tandem, while
both decentralization and centralization can and should co- exist
as complementary approaches to achieving desired development
objectives. There is thus no single blueprint on how to undertake
decentralization. A number of principles and conditions are
nonetheless available to guide decentralization decisions, of which
the following have general applicability in the agricultural and
rural development context: a clear articulation of decentralization
goals and outcomes; selection of the appropriate form of
decentralization; ensuring an appropriate mix of basic conditions
are present.
7.1 Goals and outcomes of decentralization
Whilst decentralization may be a desirable end in itself, we must
not lose sight of the fact that it is also a means to achieving
certain agricultural and rural development goals. The hierarchy of
cause-effect relationships between a given type of decentralization
(be this political, fiscal, or administrative in nature) and
development objectives provides a useful framework to assist in the
design as well as in assessing the progress and results of reforms.
A conceptual model for identifying and categorising the system
outcomes and their links to development goals is given in Figure
415, below.
15 Adapted from A. N. Parker, 1995.
Decentralized Development in Agriculture An Overview
15
Decentralization measures
Policy decisions
Desired outcomes
Political sub-system
Fiscal sub-system
Accountability Transparency Resource mobilization Resource
allocation Participation Institutional and fiscal capacity
Development services delivery in terms of: Effectiveness
Responsiveness Efficiency Sustainability
Development goals Greater agricultural productivity Enhanced rural
incomes and living standards Improved health and other social
indicators Greater inter-area equity Sustainable use of natural
resources, etc.
7.2 Three key principles for decentralization
What constitutes appropriate forms and level of decentralization
may be guided by three key principles, namely that of: a)
subsidiarity; b) jurisdictional spillover; and c) specialization.
a) Subsidiarity is the principle whereby administrative
responsibilities are assigned to the lowest level of governance
capable of carrying out these responsibilities competently. This
principle can help in deciding which functions are best provided by
central government, by different levels of local government, by
civil society or private sector organizations. for instance,
provision of a service like domestic water supply, may be
EASYPol Module 012 Thematic Overview
16
the responsibility of a national organization. Subsidiarity may
indicate that operational responsibility for supplying specific
townships or locations be entrusted to local offices. These would
be better placed to serve the location, take routine operational
decisions, undertake maintenance, and quickly intervene in case of
breakdowns. Similarly, this principle may require that a large
irrigation scheme be subdivided into those sections that can be
managed by local autonomous units (e.g. operation and maintenance
of tertiary canals), separate from the agency responsible for the
parts (dams and main canals) of the scheme which serve all the
sections16. b) Jurisdictional spillover is the principle whereby a
service should be controlled and financed at the jurisdictional
level where there are no spillovers or externalities on
neighbouring jurisdictions. The impact of externalities can vary
enormously in terms of the geographical area or number of people
affected. This is an important consideration in decentralization
because economically-efficient delivery implies that the service
should be controlled and financed at that scale where there are no
spillover effects. This reduces the extent of ‘free riding’. Thus,
a service should only be controlled and financed at the district
level if there are no significant spillovers into surrounding
districts. For example, an access track to a single village, or a
micro-irrigation project whose beneficiaries are members of a
single community, or a health dispensary that serves only one
village, is a community affair. A feeder road linking several
villages or an irrigation scheme involving an area controlled by
several villages or a health centre serving several villages, is a
municipal or sub-district affair because the impact of these
initiatives spills over the territorial boundary of a single
community. Spillover effects can impact negatively on others
outside a particular jurisdiction, leading to potential for
conflicts between communities and regions within a country. This
may require intervention at the central government level where
sub-national or private entities are not able to resolve the
problem among themselves17. c) Specialization is the principle
whereby limits are imposed on the domain within which an
organization has authority to assume responsibility for autonomous
decision- making. By ‘domain’ we mean the agendas for which an
organization has responsibility to take independent decisions and
the means to implement them. Each level of governance is defined by
its domain, that is by the agendas for which an organization has
responsibility to take independent decisions and means to implement
them. the domain may refer to:
16 See, for instance, the following EASYPol Module 013:
Decentralization and Agricultural Development: Decentralization of
Agricultural Services. 17 Conflict management issues are further
discussed in the EASYPol Module 014: Decentralization of
Agricultural Services: Decentralization of Rural Financial
Services.
17
a specific agenda concerning the entire territory of a country, for
example: to produce electricity, build and maintain trunk roads,
collect taxes, run the judiciary system; or
a set of agendas in a selected part of the territory, for example,
run schools, set and enforce traffic regulations, manage health
centres, etc., within the territory of a municipality.
Defining agendas according to the principle of specialization is
not straightforward. However, some domains appear more easily
defined according to the specialization principle. For example,
primary schools are often the responsibility of municipalities;
middle schools that of the provinces/districts; higher education of
the regions; and universities of the central government. Where
clearly identifiable general interests are involved, such as
utilization of scarce national resources (say, water), or
prevention of contagious diseases (with respect to animal and human
health), there is little doubt that it is the central government’s
responsibility to set the rules and devolved organizations must
comply. Devolution of authority to perform a function would include
the obligation to respect higher authority ruling in those matters,
thus establishing a boundary of the domain.
7.3 Basic conditions
Experience has shown that in order for decentralization to be
effective and sustainable, the right combination of factors and
conditions must be present. Its pace should not be too rushed, to
allow for adaptation, nor too slow, to allow the process to forge
ahead18. Some general rules of thumb (necessary though not
sufficient conditions) which ought to be followed include the
following: Sufficient financial resources to ensure the
accomplishment of the tasks under the
responsibility of the local and decentralized institutions. Actual
empowerment of decentralized institutions and enough power to
influence
the political system and the development activities. Accountability
mechanisms such as local elections to improve transparency
and
representation, as well as public access to information on costs of
services, delivery options, funding sources and performance
levels.
Legal and institutional framework clearly specifying the powers and
responsibilities of local governments to avoid interference and
overlapping with central government.
Adequate capacities of local institutions to ensure delivery of the
appropriate services.
These conditions can be summarized into three main points spanning
political, administrative, and fiscal dimensions:
18 FAO, 1997, FAO Experience on Decentralized Rural Development,
Rural Institutions and Participation Service, SDA, Rome,
Italy.
EASYPol Module 012 Thematic Overview
18
Decentralization must be accompanied by a real political will at
the central level and
actual transfer of legislative and policy powers (political
dimension). Local institutions ought to be given the responsibility
for delivering and managing
services at the local level (administrative dimension). Clear
definition of the mechanisms, authority, and responsibility for
spending funds
obtained either from direct taxation or from central government
(fiscal dimension). In the absence of the above, the success of any
decentralization process could well be jeopardized.
8 INTERNATIONAL EXPERIENCE AND FAO CONTRIBUTION
Experience of decentralization around the world shows that
achieving an appropriate combination of political, fiscal and
administrative elements is vital to a successful programme of
decentralization. It also reveals many opportunities for redefining
roles and responsibilities amongst government as well as private
and civil service organizations. Rather than just ‘rolling back’
the functions of government, predicated are the enhancement and
strengthening of certain government roles at various levels. This
covers public institutions and local governments, and cuts across a
wide range of administration and development support functions. At
the same time, the importance of empowering and improving
capacities of civil society is reaffirmed: this includes supporting
and facilitating innovative approaches to agricultural and rural
development at the local level. Recognition of the above needs had
led to a wide range of country and international initiatives. For
instance, the World Bank has for some time now been engaged in
research and training activities in decentralization processes,
with particular emphasis on fiscal and public sector management
aspects. Amongst UN agencies, UNCDF has been active in the areas of
local development funding and planning, while UNDP has been
supporting decentralized governance activities within the wider
ambit of its governance programme. FAO sponsored an Inter-Agency
Technical Consultation on Decentralization in December 1997. It
had, over the years, built up a valuable knowledge-base and
experience in decentralized development, and had responded to
country needs through its regular and field programmes. Technical
support had been extended not only to civil society but also public
institutions and local government organizations, by its many
divisions and services, especially those in the technical
cooperation, sustainable development, agricultural and forestry
departments. These included inter alia the following: Enhancing and
refining methodologies for gathering information on
agricultural
production systems based on interactive frameworks for popular
participation, consultation and partnership.
19
Training and methodological development in decentralized planning,
based on didactical approaches of training needs assessment and
supporting governments in targeting training actions in the
decentralization process.
Supporting the identification and definition of local government
and community roles in rural development, including building of
interfaces and exploitation of regional development
potentials.
Elaboration of a wide variety of people-centred activities which
involved local communities in natural resource management, such as
in village land/soil management and community forestry (forest,
trees, and people programme), participatory approaches to
agricultural extension, and peoples-participation- programmes which
emphasised building of rural organizations.
For further information on past FAO activities, refer to: FAO-SDA,
1997. FAO Experience on Decentralized Rural Development,
Decentralization and Rural Development Coll. no 1, FAO-SDA, Rome,
Italy.
9 READERS’ NOTES
9.1 Easypol links
This is one of several modules of a thematic overview nature in the
training path Decentralization and agricultural development. Issues
addressed in this module are further developed in the following
modules: EASYPol Module 013: Decentralization and Agricultural
Development:
Decentralization of Agricultural Services EASYPol Module 016:
Environment in Decentralized Decision Making: An
Overview Each of the above which are further linked to modules
covering Conceptual and Technical Materials. Another training path
which has close technical linkages to the present one is: Analysis
and monitoring of socio-economic impacts of policies.
10 REFERENCES AND FURTHER READING
Ebel, R. D. and Yilmaz, S., 2002. Concept of Fiscal
Decentralization and Worldwide Overview. World Bank Institute,
Washington DC, USA.
(http://www.worldbank.org/wbi/publicfinance/)
FAO, 1997. FAO Experience on Decentralized Rural Development,
Decentralization and Rural Development. Coll. no 1, FAO-SDA. Rome,
Italy.
(http://www.ciat.cgiar.org/planificacion_rural/taller_territorio/FAO/sdar/typology_decentralization/c
d_typology/docs/d01e.pdf)
FAO, 1991. The Role of Public and Private Agents in the Food and
Agricultural Sectors of Developing Countries, by L. D. Smith, L. D.
& A. M. Thomson. FAO Economic and Social Development Paper No.
105. Rome, Italy.
20
Litvack, J. and Seddon, J. (eds.), 1999. Decentralization Briefing
Notes. World Bank Institute Working Papers, in collaboration with
PREM Network. (http://www-
wds.worldbank.org/servlet/wdscontentserver/wdsp/ib/1999/11/04/000094946_99101505320840/re
ndered/pdf/multi_page.pdf)
Manor, J., 1997. The Promise and Limitations of Decentralization.
FAO Technical Consultation on Decentralization, Rome, 16 – 18
December 1997. FAO, Rome, Italy.
Mintzberg, H., 1983. Power in and Around Organisations. Prentice
Hall, New York, USA.
Online Sourcebook on Decentralization and Local Development:
Collaborative Effort, by FAO, GTZ, SDC, UNDP and the World Bank.
(http://www.ciesin.org/decentralization/entryway/english_contents.html)
Ostrom, E., 1990. Governing the Commons: The Evolution of
Institutions for Collective Action. Cambridge, Cambridge University
Press, UK.
Parker, A. N., 1995. Decentralization: the Way Forward for Rural
Development? Policy Research Working Paper 1475. World Bank,
Washington, D.C, USA.
Rondinelli, D. A., 2001. Decentralization Briefing Notes: What is
Decentralization? World Bank Institute
(http://www.worldbank.org/wbi/publicfinance/documents/topic01_bn1.pdf)
Rondinelli, D. A., 1981. Government Decentralization in Comparative
Perspective: Theory and Practice in Developing Countries.
International Review of Administrative Science, 47.
Ross, R. L., 1988. Government and the Private Sector: Who Should Do
What? Crane Russak, New York, USA.
Smith, L. D., 1999. Conceptual Issues Underlining Agricultural
Parastatal Reform. Paper prepared for the FAO Policy Assistance
Unit, Subregional Office for Eastern and Southern Africa. Rome,
FAO, Harare, Zimbabwe.
Stiglitz, J. E., 1997. Economics 2nd ed. WW Norton, New York,
USA.
21
French
Spanish
English An Overview
Other language
4. Summary
This module is a general introduction on what decentralization is
about, its relevance to agricultural and rural development, and
important conceptual and practical issues to be considered in
policy decisions. It is meant to provide a basic understanding of
the key principles and basic conditions involved, including the
empirical nature of decentralization processes, and the importance
of systematic analysis in decision making. It thus serves as an
essential backdrop to examining wider policy reform agendas,
cutting across such initiatives as rural income generation, poverty
reduction, food security enhancement, and the management and
protection of natural and environmental resources.
It is intended to precede, and used in conjunction with, modules
covering topics on decentralization of agricultural services;
environment in decision making; and decentralized planning and
management. It has however wider applicability in a range of other
training contexts, including those on rural development strategies;
participatory approaches to development; sustainable livelihoods;
local and regional development; and environmental analysis and
planning.
5. Date
November 2005
6. Author(s)
K.C. Lai, Consultant, Agricultural Policy Support Service, Policy
Assistance Division, FAO, Rome, Italy Vito Cistulli, Agricultural
Policy Support Service, Policy Assistance Division, FAO, Rome,
Italy
7. Module type
8. Topic covered by the module
Agriculture in the macroeconomic context Agricultural and
sub-sectoral policies Agro-industry and food chain policies
Environment and sustainability Institutional and organizational
development Investment planning and policies
EASYPol Module 012 Thematic Overview
22
heral
CGA
ral
ti
Poverty and food security Regional integration and international
trade Rural development
9. Subtopics covered by the module
10. Training path Decentralization and agricultural
development
11. Keywords
4.1 Decentralization as a process? 2
4.2 Who is involved? 3
4.3 Forms of decentralization 4
4.4 Practical expressions of decentralized development 6
5 Benefits and disadvantages of decentralization 7
5.1 Potencial benefits 7
6 Decisions on decentralization: conceptual and practical is
6.1 Reasons for government interventions 10
6.2 Service provision roles and responsibilities 11
6.3 Organizational and political factors 12
7 Principles and conditions for decentralization 14
7.1 Goals and outcomes of decentralization 14
7.2 Three key principles for decentralizatoin 15
7.3 Basic conditions 17
9 Readers’ notes 19
9.1 Easypol links 19
Module metadata 21